Thursday, September 15, 2011
The FT Alphaville notes an important difference between US and UK tender offers. They point to H-P's announcement that it is extending its tender offer after 42% of shares were tendered. My reaction, like Alphaville's was "that's awful low." But it turns out, that's good for the UK where tender offers in their first round typically get only 10% of shares. Now, that's low. From Alphaville:
A typical level of acceptances at the first close of a UK takeover offer is somewhere around 10 per cent. That’s because investors are reluctant to give up the optionality of backing another bid emerging. In fact, hedge funds almost never give up this optionality until they absolutely have to.
But in this instance almost 42 per cent of Autonomy shareholders have signed up at the first opportunity even though there’s the possibility (admittedly slim) of a counter bid
Interesting. I wonder what drives this behavior. The Takeover Panel rules?
Tuesday, September 13, 2011
This is a feud that never ends, I suppose. Reuters is reporting that the US Attorney has "launched a criminal probe into whether eBay Inc employees misappropriated confidential information from classified ad service Craigslist."
You'll remember that Chancellor Chandler in the Delaware Chancery Court ruled that against Craigslist in a rare case ordering a board to remove a poison pill in 2009.
According to Reuters, Cerberus has blamed the poor economy for its MAC its deal with Innkeepers. In Cerberus' reply to Innkeepers' complaint, they blame "unforeseeable, unprecedented, and materially adverse economic developments", namely the prospect of a double-dip recession, for the claimed MAC. So...if I can find a reputable economist, like Krugman or Roubini, who was predicting a double-dip recession in say July, then the economic developments would no longer be unforeseeable?
Anyway, the reply also seems to stick it in Innkeepers' nose that the MAC was really, really broad, essentially giving Cerberus a contractual right to walk away from the deal at the slightest event:
Doesn't really matter anyway. The essence of Cerberus' reply is "so what?" They argue that it doesn't really matter whether the court decides there isn't a MAC, because the parties agreed to a $20 million reverse termination fee as liquidated damages in the event of a contractual breach by Cerberus.
The argument is that Cerberus didn't actually acquire Innkeepers, it acquired an option to purchase Innkeepers. To top it off, if the court decides there was a MAC, then Cerberus wants its deposit back. Ouch. That would hurt.
Monday, September 12, 2011
Ted Allen at the ISS Corporate Governance Blog highlights a common trend in the corporate law -- the depressing race to the bottom that is characterized by state legislatures responding to management demands for protection from their own shareholders. Iowa has now joined the list of states that now require classified boards of their public companies. (h/t Broc Romanek)
Earlier this year, state lawmakers approved an amendment to the Iowa Business Corporations Act (IBCA) that requires public companies with more than 2,000 shareholders to maintain staggered board terms until Dec. 31, 2014. The law, which took effect March 23, provided a 40-day period during which a company's board could unilaterally vote to opt out of the classification mandate.
It appears that this legislation was passed to help Casey's General Stores, an Iowa-incorporated firm that faced an unsuccessful proxy fight in 2010. Casey's, an S&P 600 small-cap firm, did not opt out of the law and since has adopted a staggered board structure. The company has strong state legislative connections. One Casey board member, Jeffrey M. Lamberti, is an attorney who served in the Iowa Legislature from 1995 to 2006, which included three years as president of the Iowa Senate. His father is Donald Lamberti, the company's founder.
The classified board law was adopted despite the opposition of some Iowa corporate lawyers. In a Feb. 16 memo, the Iowa State Bar Association's Business Law Section Council observed that the legislation "will dramatically reduce the odds" that companies like Casey's would face proxy fights, but warned that it "would eliminate the voice of shareholders [from deciding whether to adopt staggered board terms] and leave that decision solely to management."
As part of its hostile effort to acquire Pharmerica, last week Omnicare filed suit against Pharmerica and its board. Here's the Omnicare - Pharmerica complaint. Now, let me state right up front that I don't think this suit falls into the more general category of litigation flotsam that accompanies many merger announcements these days. Although this is acquisition-related litigation, it involves a purported acquirer attempting to have the target's board withdraw its defenses against the offer. This case is more along the lines of the Airgas scenario. In any event, given Airgas, one wonders whether Omnicare thinks it can pull an Omnicare-styled rabbit of the litigation hat. And why not? It happened famously for them once before.
In any event, the first defense that Omnicare would like the court to order withdrawn is Pharmerica's pill. It's hard, given Airgas, to come up with a reasonable justification for the court to order Pharmerica's board to pull its pill. Maybe after a year or trying, but now? Probably not. Omnicare's argument that Pharmerica's board is violating its fiduciary duties by not negotiating with Omnicare is going to fall flat. The requirement is that Pharmerica's board be informed. There is no requirement that it negotiate to sell its company to an unwanted bidder. Of course, this is complicated by the fact that early in the summer, Pharmerica's CEO approaced Omnicare's CEO to discuss a possible combination, but that's just a complication. Omnicare doesn't present any evidence to seriously suggest that Pharmerica's board is uninformed about its decision not to engage with Omnicare.
Second, Omnicare would like the court order Pharmerica's board to adopt resolutions exempting Omnicare from the effects of DGCL 203. Yikes. Omnicare's argument is essentially that Pharmerica's board is violating its fiduciary duties to the corporation by not actively exempting an unwanted bidder from Delaware's antitakeover statute. Absent egregious facts that aren't present in the complaint, I can't imagine a court taking that argument all that seriously.